It's well known that the rich are getting richer, and the poor are not, and that the Pandemic made the situation worse.
This evidence is strengthened by the World Inequality Report. The new analysis, led by the prominent economist and inequality expert Thomas Piketty, draws on two decades of data on wealth and income inequality across the globe to show massive wealth disparity between the rich and the poor.
The authors wrote that the half of the global population that barely owns any wealth is 2% of the total. The richest 10% of the global population own a lot of wealth.
The markets are inflated right now, which is a big reason why the gulf has widened. The S&P 500 is up 25% this year and has increased since the lows of March 2020. Home prices are growing at a faster rate than in the past.
Financial assets are very valuable right now. The good news for the richest 10% of the country is that valuations have increased.
Helping Wall Street helped revive the economy, but also widened the wealth gap.
Stimulus initiatives enacted by the Trump and Biden administrations to rescue the economy and stabilizing civilization ended up indirectly playing a key role in the inflation of financial assets.
Corporations were able to raise massive amounts of debt at favorable terms because of the Federal Reserve's decision to slash interest rates. Those firms used that capital in ways that boosted their future profit-growth prospects and stock prices.
The monetary-policy shifts that accompanied theStimulus gave already-wealthy people the opportunity to take advantage of record-low mortgage rates, which in turn started the inflationary cycle seen in the housing industry.
The Fed's intervention has been great for financial assets and the wealthy people that own the majority of them.
A lot of billionaires invest in individual companies and portfolios of investments in hedge funds and private equity. According to Forbes data, US billionaire wealth increased by 70%, or $2.1 trillion, during the pandemic.
The decisions the Fed made last year were necessary to stabilizing the economy early in the Pandemic. The widening income gap is a result of the central bank's post-COVID support.
The report found that the poor tend to use cash or bank deposits to make their money, while the rich use their wealth in financial assets. The market value of land and houses at the bottom of the wealth-distribution scale isn't significant. The middle class typically holds bank deposits and real estate, and equity and bonds make up a small portion of its wealth.
Financial assets make up 40% to 60% of the wealth of the rich. The richer people have more of their wealth in financial assets. They have more bank deposits, stocks, and bonds than other classes.
The main goal of the Fed's policies last year was to help the economy deal with the swine flu. The country was spared from a financial crisis in the first year of the Pandemic because of those policies. It gave banks and corporations more money to lend by pushing down long-term interest rates. By mid-April, the index had regained half of its losses and was at record highs.
That's helped average consumers as well. Interest rates on credit cards and mortgages were kept low by the Fed. The Fed prevented job losses.
Since the start of last year, the economic growth has been caused by theStimulus payments distributed under the Biden and Trump administrations. According to the Congressional Budget Office, the money allocated by the CARES Act increased the US' economic output by 0.6% in 2020.
During a time when the bond market wasn't yielding much, investors revived the market and helped stocks recover. America's household wealth hit a record high in the third quarter of the year as the wealthy profited from a recovering stock market.
Most Americans don't own stocks. After the Fed supported Wall Street with cash, Americans are suffering from a 30-year inflation high.
The government's reluctance to tax the wealthy more was found to be a factor in the World Inequality report.
The richest Americans are taxed less for the ways in which they accumulate wealth than for the financial assets they own. Capital gains taxes are triggered only when an asset is sold, so if a rich person lets their stocks or bonds accumulate, their wealth on paper grows untaxed the whole time.
The report says that the differences confirm that inequality is a political choice.
